Article 57(8) MiFID II requires investment firms and market operators operating trading venues to apply position management controls.
This regime will operate in tandem with position limits set by the EU Member States' national financial regulatory authorities.
ESMA's Discussion Paper on MiFID II/MiFIR of 22 May 2014, ESMA/2014/548 underlines that "these controls are a mandatory part of the new control framework and will necessarily interact closely with the ESMA position limits methodology and the relevant competent authority's position limits regime. Any position limits set by a trading venue using its position management powers will of necessity be of an equal or lesser size than that established by the relevant competent authority".
Member States are burdened by MiFID II with the responsibility to ensure that every investment firm or a market operator operating a trading venue which trades commodity derivatives applies position management controls.
Those controls must include at least, the powers of the trading venue to:
(a) monitor the open interest positions of persons;
(b) access information, including all relevant documentation, from persons about the size and purpose of a position or exposure entered into, information about beneficial or underlying owners, any concert arrangements, and any related assets or liabilities in the underlying market;
(c) require a person to terminate or reduce a position, on a temporary or permanent basis as the specific case may require and to unilaterally take appropriate action to ensure the termination or reduction if the person does not comply; and
(d) where appropriate, require a person to provide liquidity back into the market at an agreed price and volume on a temporary basis with the express intent of mitigating the effects of a large or dominant position.
The position limits and position management controls both must be transparent and non-discriminatory, specifying how they apply to persons and taking account of the nature and composition of market participants and of the use they make of the contracts submitted to trading.
The interesting tool envisioned by MiFID II is the database on the ESMA's website containing the summaries of the position limits and position management controls (see link below).
Feeds informing this database come from the investment firm's or market operator's submissions to the national competent authorities as well as the consequent competent authorities' communications to ESMA.
This database, as visited on 26 July 2020, contains records indicating the following stakeholders:
- Vienna Stock Exchange,
- ICE Futures Europe (IFEU),
- Marex Spectron International Limited,
- Sunrise Brokers LLP,
- GFI brokers Ltd,
- BGC Brokers L.P.,
- ICAP Energy,
- PVM Oil Futures,
- Tullet Prebon (Europe),
- Griffin Markets Limited,
- London Metal Exchange (LME),
- Norexeco ASA,
- Nasdaq Oslo ASA,
- Fish Pool ASA,
- Nasdaq Stockholm AB.
ESMA’s MiFID II Review report of 1 April 2020 on position limits and position management (ESMA70-156-231, p. 34) indicates that in most cases, the information provided by trading venues explains with a varying degree of detail how the position management controls in place achieve compliance with the requirement of Article 57(8) of MiFID II.
However, two trading venues mentioned position management controls that extend beyond the ones set out in Article 57(8) of MiFID II:
- ICE Futures Europe may promulgate limits and associated arrangements in relation to open positions that may be owned, controlled or carried by a member or person for his own account or for another person;
- the London Metal Exchange (LME) has introduced a requirement for the provision of additional information upon request, for positions held by members either directly or on behalf of their client(s) that are above the accountability levels set by the venue for each contract code.
MiFID II, Article 57(8)
ESMA Discussion Paper on MiFID II/MiFIR of 22 May 2014, ESMA/2014/548